Understanding TAN for NRI Property Purchase (Updated for Budget 2026)

Tax Deduction and Collection Account Number (TAN) is a unique 10-digit alphanumeric code issued by the Income Tax Department of India, primarily used for tracking Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). Historically, TAN played a central role when an Indian resident purchased property from a Non-Resident Indian (NRI), as the buyer was required to deduct and deposit TDS on the transaction.

Important Update (Budget 2026)

Under the Union Budget 2026-27, the government has announced that resident buyers will no longer be required to obtain a TAN to deduct and deposit TDS on property purchases from NRI sellers. This change is proposed to take effect from 1 October 2026. Buyers can now use a PAN-based challan instead. This is the same mechanism which is already used for resident-to-resident property transactions under Section 194IA.

Is TAN Still Mandatory for NRI Property Purchase?

Not from 1 October 2026 onwards.

Earlier, whenever an Indian resident bought a property from an NRI seller, the buyer was legally required to obtain a TAN to deduct TDS under Section 195 of the Income Tax Act, regardless of the property value. Unlike Section 194-IA (which applies to resident sellers and only kicks in above ₹50 lakh), Section 195 has no minimum threshold, so even a modest-value property purchase from an NRI triggered the TAN requirement. Obtaining the TAN was a one-time but often time-consuming process (Form 49B, approval wait time of 7–15 working days, etc.).

With the Budget 2026 amendment, this requirement has been removed. Buyers can now deposit TDS directly using their PAN, without applying for a separate TAN. This brings NRI property transactions in line with the simpler process already used for resident sellers.

Note: For transactions completed before 1 October 2026, the earlier TAN-based process (as described below) still applies.

What Was the Old Process (Before 1 October 2026)?

Under the earlier rule, buyers had to:

1. Apply for a TAN via Form 49B on the NSDL/Protean website
2. Wait for approval,  typically 7 to 15 working days
3. Use the TAN to file the TDS return and challan
4. Submit documentation along with the challan
5. Complete the transaction only after TDS compliance was in place

This process, while manageable for businesses, was often frustrating for individual homebuyers making a one-time purchase.

What Is the New Process (From 1 October 2026)?

Under the revised framework, the process is simplified to:

1. Calculate the TDS amount based on the applicable rate under Section 195 (generally around 20% on capital gains, or as applicable, unless the seller holds a lower/nil deduction certificate)
2. Prepare a TDS challan using your existing PAN, no separate TAN application needed
3. Deposit the TDS amount through this PAN-based challan
4. File the TDS return along with the required documentation and challan details

Does This Mean TDS Rates Have Changed?

This is a purely procedural simplification. It does not reduce or waive the tax itself.

• TDS under Section 195 continues to apply at the same rates as before (commonly around 20% on the sale consideration, or based on long-term/short-term capital gains, subject to applicable surcharge and cess).
• If the NRI seller obtains a Form 13 certificate (lower or nil deduction certificate) from the Assessing Officer under Section 197, the buyer’s TDS obligation can be reduced accordingly — this option existed before and remains available.
• The buyer’s underlying legal obligation to deduct and deposit TDS remains fully in force; only the TAN requirement has been removed.

Legal and Financial Implications for Buyers

Legal: Even though TAN is no longer required, the buyer is still legally responsible for correctly deducting TDS, depositing it on time, and filing the appropriate return. Failure to do so can still result in penalties, interest, and other consequences under the Income Tax Act.

Financial: Accurate TDS deduction and deposit remain essential to avoid being held liable for the full tax amount plus penalties. The PAN-based system is expected to make TDS credit reflect faster in Form 26AS, which can help both buyer and seller during future tax assessments.

Does the ₹50 Lakh Rule Apply Here?

This threshold is for resident-to-resident deals, not NRI transactions. Section 194-IA (TDS on property bought from a resident seller) applies only when the property value exceeds ₹50 lakh. Section 195 (property bought from an NRI seller) has no such threshold. TDS applies regardless of the transaction size. 

Conclusion

Buying property from an NRI is now procedurally as simple as buying from a resident seller. From 1 October 2026, resident buyers no longer need to obtain a TAN. TDS can be deposited using a standard PAN-based challan. The tax rates and the buyer’s compliance obligations remain unchanged; only the paperwork has been simplified. 

For personalised guidance on your specific transaction consult a qualified property tax expert.